Sadoun: ‘many of our clients came to us to say this would be a game-changer for us’

Publicis Groupe has today agreed to acquire data marketing company Epsilon for a total cash consideration of $4.4bn (£3.36bn), making it one of the marketing services industry’s biggest-ever deals.

Epsilon is described in an official Publicis statement as “a unique technology and platforms company with unparalleled data assets built over years”. It is the group’s biggest purchase to date.

The acquisition is aimed at strengthening Publicis’ ability to offer data-driven personalised experiences at scale: analysts estimate that the deal could give Publicis access to more than 200 million customer data sets and transform its targeted marketing solutions services, particularly in North America.

Publicis said that Epsilon and its platform Conversant is the leader in CRM and loyalty programmes in the US, with its data covering 56% of all transactions in the US.

Epsilon, which generated revenues of $2.2bn in 2018 (down 4 per cent year on year), is owned by Alliance Data and, as well as acquiring the Epsilon business, Publicis has announced that it is now entering into a strategic partnership with Alliance Data’s remaining business.

A Publicis press release said: “This acquisition will accelerate the implementation of Publicis’ strategy to become the preferred transformation partner for its clients.”

Q1 financial results

The deal comes as Publicis unveiled a 1.6 per cent decline in organic net revenue for the first quarter, although reported net revenues were up 1.7%.

Arthur Sadoun, chairman and chief executive of Publicis, said the results were “in line with expectations, confirming our take on what we anticipate for the year”.

He said that the company’s “game-changers” combining data, dynamic creativity and business transformation were up 27 per cent in the quarter and that the retention of clients “also recorded a marked improvement”.

However, Sadoun acknowledged that the company was still suffering attrition from FMCG clients “and that has remained high in the quarter. North America net revenue has been particularly affected by this attrition that represented around 300 basis points of impact on the region performance.” Sadoun added that he believed the pace of attrition will slow in the second quarter.

‘Game-changer’

Sadoun told Campaign that when news leaked that Publicis was in talks to buy Epsilon, “many of our clients came to us to say this would be a game-changer for us, and that was very reassuring”.

The leak at the beginning of this month initially sent the Publicis share price dipping to around €45, its lowest point since 2012. Sadoun admitted: “Everyone will question our ability to integrate a business this big, but we’ve learned from our experience with Sapient how to bring businesses together. Epsilon is much closer to our core marketing services business than Sapient and we’re very confident we can integrate it really well.”

He added that the two parties had had around 50 meetings in the run-up to today’s announcement to ensure both sides were convinced of the strategic and operational fit.

Sadoun said he expected the deal to be finalised by the beginning of the second half of the financial year and that Epsilon would then sit “at the core of the group, a standalone business working with all of our group companies”. About 97% of Epsilon’s business is focused on the US, but the plan is to expand the business internationally, under the leadership of existing chief executive Bryan Kennedy, once the deal is finalised.

Boosting creativity

In announcing the deal, Sadoun has also been keen to stress that it is designed to enhance the value of creativity. “This is will boost our creative product and dynamic content with incredible human insights. You can have all the data in the world and all the technology in the world, but what brings emotion is the creative idea and that’s still at the core of our company.”

In a video sent to all Publicis staff today (Sunday), Sadoun said: “Today is a very important day for Publicis Groupe; actually, maybe one of the most important in our history.”

He concluded: “At the moment, systems integrators are buying creative companies to actually advance their own agenda. We are taking a stand for our industry, for our people and for creativity.”